Ninth Circuit Judge William Fletcher is the author of two recent Ninth Circuit opinions affirming district court denials of motions to arbitrate against class action plaintiffs. Like his mother, the distinguished late Ninth Circuit Judge Betty Binns Fletcher, W. Fletcher was born in the State of Washington, and the next two cases involve Washington law.
Beware the “Click” Signature!
The consumer in Lee v. Intelius Inc. v. Adaptive Marketing LLC v. Adaptive Marketing LLC, No. 11-35810 (9th Cir. Dec. 16, 2013) purchased a background check on the Internet from Intelius – and inadvertently purchased a “Family Safety Report” by clicking a button on the website. Plaintiff filed a state-law class action against Intelius, and Intelius then sued Adaptive, the company that actually provided the unwanted Family Safety Report. Adaptive moved to compel arbitration of Plaintiff Lee’s and Intelius’s claims, and the district court denied the motion to compel.
The Ninth Circuit affirmed the denial. Buttons on the website were confusing, there was “small, light grey print that did not stand out prominently from the beige background’, the text was long, and there were multiple hyperlinks. However, “Washington courts have not decided whether or under what circumstances a ‘click’ constitutes a signature.” Therefore, the Court rested its conclusion on the safer ground that the webpage insufficiently identified Adaptive as a contracting party.
As to the specific arbitration provision embedded in Adaptive’s terms and conditions, the “careful consumer would reasonably have understood . . . that the hyperlink to ‘Terms and Conditions’ was to Intelius’s rather than Adaptive’s terms and conditions.”
Court Recognizes That Plaintiffs Who Don’t Want To Arbitrate Don’t Raise The Issue In Their Complaint
Under Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the court gets to decide whether the arbitration clause is invalid, but the arbitrator gets to decide whether the whole contract is invalid, when the complaint attacks the validity of the contract as a whole, rather than just the arbitration clause.
What happens when plaintiff doesn’t want to arbitrate, files a complaint that doesn’t address arbitration, and then opposes a motion to compel? The district court gets to consider the validity of the arbitration clause, where the arbitration clause’s invalidity is entirely distinct from the contract claims in the case. Smith v. Jem Croup, Inc., No. 11-35964 (9th Cir. Dec. 12, 2013). As Judge Fletcher notes, many contracts provide for compulsory arbitration at the choice of one or both parties, but if neither party asks for arbitration, the dispute may be brought as a lawsuit. Under those circumstances, it would be unrealistic to expect the plaintiff to challenge the arbitration clause in its complaint, but it would make sense to challenge the clause in the context of opposing a motion to compel.
Moreover, the arbitration clause here was found to be unconscionable – under Washington law. Here, I note that there appears to be a difference between Washington and California law, as Judge Fletcher writes that “[u]nder Washington law, a contractual provision is unenforceable if it is procedurally unconscionable.” Under California law, a finding of unconscionability requires procedural and substantive unconscionability.
The opinion also provides a rationale for why the Federal Arbitration Act and Concepcion do not preempt Washington procedural unconscionability law, including among other factors, that Washington law applicable to the disclosure of material terms in an attorney retainer agreement “is not specifically aimed at arbitration clauses.”